NAV on 2019/09/13
|NAV on 2019/09/12
|52 week high on 2018/11/07
|52 week low on 2019/09/03
|Total Expense Ratio on 2019/06/30
|Total Expense Ratio (performance fee) on 2019/06/30
STANLIB Collective Investments (RF) Limited
South African--Real Estate--General
FTSE/JSE All Property Index (ALPI)
Keillen began his property fund management career at Standard Bank Properties in 2004 managing its leveraged listed property product. He became a listed property analyst at Stanlib in 2005 and now also co-manages the Stanlib Aggressive Income Fund.
Nesi started his investments career with RMB in 2002 where he was a member of the consumer industrial team and also assumed non-consumer research responsibilities. Nesi was previous head of Financials at RMB Asset Managers, responsible for banks and life assurance. He also managed the award winning RMB Financials Fund. In 2010, He was appointed as a fund manager and Head of property for Momentum. He managed the flagship Momentum Property Fund for over a decade and was responsible for asset allocation, research, strategy, and fund management within the property investments business. Nesi is a regular commentator on property, equities and the broader financial market. Nesi Joined STANLIB in June 2019 to co manage local and global listed property.
STANLIB Property Income Fund - Jun 19
STANLIB Property Income fund outperformed the benchmark by 1.79% for the second quarter of 2019, delivering a 3.27% gross total return compared to the benchmark gross return of 1.48%. This quarter’s outperformance is attributable to our underweight positions in Intu, Capital and Counties, RDI REIT and over-weight positions in Fortress A and Investec Australia Property fund. Over-weight positions in Sirius, Fairvest and Rebosis and under-weight positions in Nepi Rockcastle and Delta Property Fund detracted from performance. Current outperformance is largely a result of our defensive approach of taking under-weight positions and/or avoiding companies with weak property fundamentals and concentrating on quality companies with stronger balance sheets and better growth prospects.
Over the past six months, SA listed property (JSE All Property Index) delivered a total return of 2.77% outperforming cash (STeFI Composite Index at 3.6%) but underperforming SA bonds, ALBI (JSE ASSA All Bond Index) at 7.6% and SA equities, ALSI (FTSE/JSE All share index equities) which delivered a 12.2% return for the quarter. Despite the rand strengthening against the US dollar over the first half of 2019, most of the pure offshore stocks contributed positively to the All Property Index (NepiRockcastle, MAS, EPP, Sirius and Investec Australia Property Fund) except for the UK focused funds.
The South African local property fundamentals continue to remain under pressure with the weak GDP growth figures of -3.2% for first quarter of 2019 creating a bleak outlook for local property sector. Management teams are reacting through the sale of non-core assets and deleveraging of constrained balance sheets. Equity capital raising doesn’t appear to be an option for most companies due to elevated forward dividend yields. During the quarter, Rebosis opted to skip payment of an interim dividend to shareholders, choosing to service its debt and Delta opted to reduce their pay-out ratio to 75% to create room for excess cash reserves. Despite this challenging environment, we continue to see specialist property operators in South Africa attracting equity capital. Equites (industrial specialist), Store-Age (self-storage specialist), Vukile (township retail specialist) have raised a combined total of R 2.0 billion during the quarter. The specialist counters also continue to trade at a premium to net asset value compared to the rest of the sector.
On the mergers and acquisitions side, SA Corporate received a number of offers following a departure of both CFO and CEO. Safari and Fairvest have announced a firm intention to merge with a swap ratio of 0.45 Safari shares for each Fairvest shares.
Corporate activity during the quarter also included, Vukile concluding an agreement with Rebosis to acquire three of its shopping centres pending a successful due diligence and EPP selling 70% of its shares in office parks in line with its strategy to focus the business towards the retail sector. Going into the second half of 2019 we expect further asset sales to be announced by companies reporting during this period.
Nepi Rockcastle has been cleared by the FSCA on all the allegations laid upon the company. The market manipulation investigation regarding Fortress and Resilient are still ongoing. Both Resilient and Fortress have been working on restructuring of their respective BEE vehicle. Resilient received the shareholder approval to dissolve BEE structure through share buy-back and Fortress has also implemented a buy-back programme to buy back its shares from its BEE trust.
The All Property Index offers a forward dividend yield of about 9%, which is marginally above SA‘s 10-year bond yield. We anticipate dividend growth rate of 2% to 3%. In the short term, dividend growth could be under pressure from weakening property fundamentals and anaemic GDP growth. We encourage investors to take a longterm view in this cyclical sector.
The commentary gives the views of the portfolio manager at the time of writing. Any forecasts or commentary included in this document are not guaranteed to occur.
The STANLIB Property Income Fund aims for the growth of capital and to provide an income source. Investments may consist of property shares, property loan stock, debentures, debenture stock and bonds, unsecured notes, property unit trusts and other listed securities considered consistent with the portfolio's objective. Liquidity may be increased to 50% if deemed necessary by the manager. Exposure to fixed-interest securities is limited to 30%. The portfolio may also invest in the participatory interests of collective investment schemes. This portfolio may not have any direct and/or indirect foreign exposure.